Metromile Inc., an InsurTech focused on pay-per-mile auto insurance, has hit the public markets in a reverse merger deal with Insu Acquisition Corp. II (Insu II), a special purpose acquisition company (SPAC).
By pursuing the arrangement, Metromile will gain access to approximately $294 million in cash that will fuel growth opportunities. The combined company expects to use proceeds from the transaction to reduce existing debt and accelerate growth initiatives, including expanding into new markets, increasing partnerships and launching new products and features.
“As a public company, we expect to use our strengthened balance sheet to accelerate our growth, bring Metromile nationwide, and scale rapidly toward sustained profitability,” Metromile CEO Dan Preston said in prepared remarks.
The merger, expected to close in the 2021 first quarter, will result in Metromile becoming a publicly listed company without the risk of an IPO. Upon closing of the transaction, the combined company will be named Metromile, Inc. and is expected to remain listed on NASDAQ under the new ticker symbol “MLE.”
Sponsored by financial services firm Cohen & Co., Insu II is a SPAC entity that targets business deals with companies in the insurance industry. Insu II raised $230 million in an initial public offering in September 2020.
A SPAC is a shell company that uses money raised from an IPO to acquire a private company, which then become public as a result and retains its corporate identity. This kind of transation happened recently with Shift Technologies, an online used car seller that went public through a reverse merger/SPAC deal of its own.
Insu will combine with Metromile for aggregate consideration of approximately $842 million in Insu II Class A common stock and up to $30 million of cash consideration, plus an additional 10 million shares of Class A common stock that will be earned if the combined company achieves certain price targets over time.
The transaction reflects an estimated $1.3 billion combined company pro forma implied market capitalization.
Founded in 2011 and headquartered in San Francisco, Metromile provides insurance policies that are priced and billed by the mile, which save customers, on average, 47 percent over what they were paying their previous auto insurer.
Currently operating in eight states, Metromile aims to have a 21-state footprint by end of 2021 and 49 states by end of 2022.
Metromile’s jump into the public markets follow more conventional IPO actions from InsurTechs including Root and Lemonade. Root’s IPO went live in late October and raised $724.4 million. Lemonade triggered its IPO in early July, pulling in $308 million.
Source: Metromile
*A version of this story ran previously in our sister publication Insurance Journal.